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Climate advocates and energy analysts alike were stunned on March 31, when Premier Jason Kenney announced that the Alberta government was investing billions more public dollars in the Keystone XL pipeline, a risky and unnecessary oil pipeline owned by Calgary-based TC Energy Corp. Without providing any evidence or analysis, Kenney said the government’s US$1.1 billion equity investment and $6 billion loan guarantee, which leaves Albertans on the hook for roughly 85 per cent of the cost of the pipeline, are "steps we must make now to build our future focused on jobs, the economy and pipelines."
Kenney’s announcement came just a day after Finance press secretary, Jerrica Goodwin, justified the layoff of 26,000 public sector education workers because there were limits to the amount of money Alberta could borrow during the economic downturn. While it’s certainly deplorable and disingenuous to prioritize corporate welfare over the day-to-day needs of Albertans, it shouldn’t distract us from a bigger problem: How recklessly Kenney is betting on Alberta’s increasingly unstable oil industry for its long-term economic salvation.
The first question Albertans should be asking themselves is why TC Energy Corp. needed the Alberta government’s help in the first place. It’s because big banks and other major investors are swearing off oil and gas projects because of the inherent risk involved in high-carbon fuels in the age of climate change.
Over the last three years, some of the biggest banks and international financiers in the world — HSBC, BNP Paribas, Natixis, ING, insurance and investment giant Axa, and Sweden’s largest national pension fund, AP7— confirmed they would no longer provide financing for oilsands projects, including the Keystone XL pipeline.
Just three months ago, Larry Fink, the CEO of investment firm BlackRock, which manages more than $6 trillion in assets, and one of the most influential investors in the world, wrote that “climate risk is investment risk” and announced his company would be “exiting investments that present a high sustainability-related risk” and creating “new investment products that screen fossil fuels.” This, he continued, was to help solve the climate challenge, “because every government, company and shareholder must confront climate change.”
Obviously, Kenney didn’t get Fink’s memo. Glen Hodgson at the C.D. Howe Institute, a think tank not known for its anti-oil rhetoric, almost certainly did. While Kenney was brokering a deal to further chain Alberta to its sinking oil ship, Hodgson was reminding Canadians that the triple whammy of COVID-19, the oil price war between Saudi Arabia and Russia and the rapid growth of ever-cheaper renewable energy sources means that only a fool would bet their entire economy on one of the dirtiest, most expensive kinds of oil on the planet.
“For affected firms and for governments, assuming a return to ‘business as usual’ may no longer be realistic or prudent,” Hodgson writes. “At this stage, companies and governments need to include multiple scenarios, examining a range of possible outcomes, to inform decision-making. To cope with the extraordinary forces at play, planning and action by both business and government ought to be founded on realism, adaptation, and innovation – and a readiness to continually adjust.”
Even as Teck Resources considers a complete shutdown of its Fort Hills mine, just a month after cancelling its Frontier mine, the Alberta government seems either incapable or unwilling of heeding such sage advice, which leaves it to the federal government to do the difficult and courageous work of weaning Canada off its unhealthy reliance on oil and gas revenues.
The fact that Prime Minister Justin Trudeau’s government stayed the course on its plan to increase the national price on carbon pollution from $20 to $30 a tonne, despite howls of protest from Conservative politicians, is a good sign and a positive signal to investors. But the federal government’s own buyout of the Trans Mountain Pipeline expansion, is also an example of our government pouring billions of taxpayer dollars into fossil fuel subsidies years after commitments made at the G20 that those would be phased out.
As rumors swirl about a multibillion-dollar federal bailout package for the Alberta oil industry in Canada, federal officials should focus their efforts on supporting workers and their families in the short term, not loan guarantees or share purchases to buoy up struggling oil companies (of which there will be many).
Even before the COVID-19 pandemic, oil, gas and pipeline companies were performing at the bottom of the S&P and going bankrupt in record numbers. Oil companies in Alberta have been increasing production while laying people off, returning fewer royalties to government coffers, leaving massive toxic public liabilities, and requiring huge and increasing government subsidies to stay in business.
"Emissions from oil and gas production are now the largest and fastest growing emissions in Canada. Propping up failing fossil fuel projects and companies is not an economic strategy in the climate era, it's simply political."
Instead, our governments would do well to listen to the advice of the International Energy Agency. No enemy of the oil and gas industry, the IEA is encouraging governments to “put clean energy at the heart of stimulus plans to counter the coronavirus crisis.” Government bailout funds could be invested in a post-pandemic economy that is cleaner and more resilient than the increasingly volatile hydrocarbon markets we rely on today.
Any financial assistance for corporations should come with commitments to help Canada meet its climate obligations under the Paris Agreement. Airlines and auto manufacturers, for instance, can commit to reduce their GHG emissions, banks can pledge to stop funding oil and gas expansion, and hard-working Canadians can be put to work cleaning up abandoned oil and gas infrastructure, which pollutes groundwater and emits methane.
If COVID-19 teaches us anything, it’s that we need to adequately assess future risks to society and then act quickly to prevent them or decrease their severity.
Given the risk of runaway climate change, it’s time to act with the same urgency we have given the COVID-19 crisis. These last few weeks have reminded us that there is nothing we can’t accomplish if we work together. In Canada, this starts with courage and leadership from the federal government, and an investment not only in our short-term basic needs, but in a clean-energy future that will provide stability and security for our generations to come.
Emissions from oil and gas production are now the largest and fastest growing emissions in Canada. Propping up failing fossil fuel projects and companies is not an economic strategy in the climate era, it's simply political.
Canadians and the world deserve better from elected officials, given the dramatic rise in extreme weather and fires sweeping the globe. Canada has shown true leadership in our carbon price and our coal phase out. It’s past time to show the world that we have the courage to say no to Big Oil, that we have the courage to diversify our economy, to cap expansion of fossil fuels and begin the wind down of production and emissions that our commitment to net zero by 2050 requires.